EPTL 10-6.6: Trust Decanting — Moving Assets to a Better Trust

New York Estates, Powers and Trusts Law (EPTL) 10-6.6 allows a trustee who has the power to invade trust principal to "decant" that principal — that is, to pour the assets of an existing irrevocable trust into a new trust with better terms. The name comes from the wine analogy: the trustee pours the contents from the old vessel into a new one, leaving the sediment (outdated, harmful, or unworkable provisions) behind. New York enacted the first decanting statute in the country in 1992 and substantially rewrote it in 2011, and the current version of EPTL 10-6.6 is one of the most frequently used tools for fixing irrevocable trusts without a court proceeding.

This page explains what the statute actually permits, the difference between the two decanting tracks (unlimited discretion versus limited discretion), the mandatory written-instrument and 30-day notice requirements, what happens when the Surrogate's Court is involved, and the most common ways decantings fail.

Trust Decanting in Plain Language

An irrevocable trust ordinarily cannot be amended. But if the trustee has discretion to distribute principal to or for the benefit of a beneficiary, New York law treats that discretion as the equivalent of a special power of appointment. If the trustee could hand the money directly to the beneficiary, the reasoning goes, the trustee can instead direct it into a new trust for that beneficiary. EPTL 10-6.6 codifies this logic and sets the guardrails.

Common reasons trustees decant in New York include:

• Extending a trust that would otherwise pay out to a beneficiary at a fixed age (for example, outright at 30) when the beneficiary has creditor problems, a pending divorce, an addiction, or simply is not ready to manage the money;
• Converting a beneficiary's interest into a supplemental needs trust conforming to EPTL 7-1.12 so that a disabled beneficiary can keep Medicaid and SSI eligibility;
• Modernizing administrative provisions — trustee succession, investment powers, division into separate trusts, or governing-law and situs provisions;
• Correcting drafting errors or ambiguities without a reformation proceeding;
• Consolidating multiple trusts for the same beneficiaries, or separating one trust into several.

Decanting is a fiduciary act. The trustee must exercise the power in the best interests of the beneficiaries and consistent with the trustee's duties of loyalty and impartiality. A decanting that primarily benefits the trustee — for example, by stripping out liability provisions or increasing commissions — is either prohibited outright or requires consent or court approval, as discussed below.

The Two Tracks: EPTL 10-6.6(b) and 10-6.6(c)

Everything in a New York decanting turns on how much discretion the trustee has to invade principal. The statute defines "unlimited discretion" in EPTL 10-6.6(s) as the unlimited right to distribute principal, not modified in any manner. A power to distribute principal for a beneficiary's "health, education, maintenance and support" — the classic HEMS standard — is not unlimited discretion. A power to distribute principal "in the trustee's sole and absolute discretion, for any purpose" generally is.

Track One: Unlimited Discretion — EPTL 10-6.6(b)

An authorized trustee with unlimited discretion to invade principal may appoint all or part of the principal to a new trust whose current beneficiaries are one or more of the current beneficiaries of the old trust. This is the powerful track:

• The new trust may exclude some current beneficiaries entirely (the appointed trust need only benefit one or more of them);
• Successor and remainder beneficiaries may be one or more of the current, successor, or remainder beneficiaries of the invaded trust;
• The new trust may grant a current beneficiary a power of appointment, including a broad power exercisable in favor of persons who were never beneficiaries of the original trust;
• The invasion standard in the new trust can be different from the old one.

Track Two: Limited Discretion — EPTL 10-6.6(c)

A trustee whose invasion power is limited by a standard (such as HEMS) may still decant, but the new trust must mirror the old one much more closely:

• The appointed trust must include the same current, successor, and remainder beneficiaries as the invaded trust;
• The beneficial interests must remain the same, and the appointed trust must carry over the same standard for invading principal;
• The trustee may nonetheless extend the term of the trust beyond the date the old trust would have terminated — during the extended term, the same invasion standard applies;
• Critically, the statute permits a limited-discretion trustee to decant into a supplemental needs trust that conforms to EPTL 7-1.12 for a disabled beneficiary, even though that changes the distribution terms. This is one of the most valuable uses of the statute, because it can preserve a beneficiary's government benefits; see our discussion of whether a trust protects assets from Medicaid in New York.

Who Is an "Authorized Trustee"

Under the definitions in EPTL 10-6.6(s), the decanting power belongs to an "authorized trustee" — a trustee with authority to invade principal, other than (i) the creator of the trust and (ii) a beneficiary to whom income or principal must or may be distributed. This restriction prevents self-interested decantings and protects the trust's tax posture. If the only trustee is also a beneficiary, that trustee cannot decant; the practical solution is often the appointment of an independent co-trustee who then exercises the power.

A Worked Example with Real Numbers

Suppose a grandmother created an irrevocable trust in 2006 for her grandson, funding it with assets now worth $1,400,000. The trust directs the independent trustee to distribute income and, "in the trustee's sole and absolute discretion, principal for any purpose," and to distribute the entire remaining principal outright to the grandson at age 30. The grandson is now 28, is a defendant in a personal injury lawsuit with exposure well above his insurance limits, and is in a shaky marriage.

If the trust terminates on schedule, $1,400,000 lands in the grandson's hands, exposed to a judgment creditor and commingled into a marital estate. Because the trustee has unlimited discretion, EPTL 10-6.6(b) lets the trustee decant the full $1,400,000 into a new trust that: (1) continues for the grandson's lifetime rather than ending at 30; (2) makes all distributions fully discretionary, so no creditor can compel a payout; (3) adds a trusteed spendthrift structure with an independent trustee; and (4) grants the grandson a testamentary power of appointment so he controls where the assets pass at his death. The grandson remains the beneficiary — the statute requires that — but the outright age-30 payout is eliminated. No court approval is required. The trustee signs the decanting instrument, serves the statutory notice described below, waits 30 days (or obtains written waivers), and retitles the assets into the new trust.

Contrast a second trust holding $600,000 where the trustee may invade principal only for the beneficiary's "health, education, maintenance and support." That trustee is on the limited-discretion track of 10-6.6(c): the new trust must keep the same beneficiaries and the same HEMS standard, but the trustee may still extend the term past a mandatory distribution age or redirect the interest of a disabled beneficiary into an EPTL 7-1.12 supplemental needs trust.

What Decanting Cannot Do — Restrictions in EPTL 10-6.6(n)

EPTL 10-6.6(n) imposes hard limits regardless of which track applies:

• Fixed income, annuity, and unitrust interests. Decanting cannot reduce, limit, or modify a beneficiary's current right to a mandatory income distribution, an annuity or unitrust interest, or a currently exercisable right of withdrawal. This protects, among others, the surviving spouse's income interest in a marital deduction trust.
• Tax-qualification provisions. If the invaded trust qualified for the estate or gift tax marital deduction, the charitable deduction, or the gift tax annual exclusion, the appointed trust cannot contain provisions that would have disqualified the original trust. A trust drafted to qualify under Internal Revenue Code section 2503(c) cannot be decanted in a way that defeats the required distribution terms. Grandfathered generation-skipping transfer (GST) tax status must also be preserved with care.
• Trustee commissions. The decanting cannot increase the trustee's compensation beyond what the invaded trust and statute allow, unless the interested persons consent or the court approves.
• Trustee exoneration. The new trust cannot decrease the trustee's liability standard, exonerate the trustee more broadly than the old trust did, or eliminate a beneficiary's existing remedies against the trustee for prior acts.
• Perpetuities. The appointed trust must measure the applicable perpetuities period from the dates applicable to the invaded trust — decanting cannot restart the clock.
• Contrary intent. Decanting is unavailable if the trust instrument expressly prohibits it or manifests the creator's intent to forbid this kind of exercise. A standard spendthrift clause, however, does not by itself bar decanting.

The Decanting Procedure, Step by Step

One of the statute's chief virtues is that court approval is not required. EPTL 10-6.6(j) sets out a self-executing procedure:

1. Confirm authority. Verify that the person exercising the power is an authorized trustee (not the creator, not a distributee-beneficiary) and classify the invasion power as unlimited or limited discretion. This classification dictates everything that follows.
2. Draft the appointed trust. The new trust must comply with the applicable track — 10-6.6(b) or 10-6.6(c) — and with all of the 10-6.6(n) restrictions.
3. Execute the decanting instrument. The exercise must be by a written instrument, signed, dated, and acknowledged (notarized in the manner of a deed) by the authorized trustee. An unacknowledged instrument does not satisfy the statute.
4. Serve the statutory notice. The trustee must deliver a copy of the decanting instrument, together with copies of the invaded trust and the appointed trust, to (a) the creator of the invaded trust, if living, and (b) all persons interested in the invaded trust and in the appointed trust. For beneficiaries under a disability, service on the appropriate representative is required.
5. File with the court if the trust is under court jurisdiction. If the invaded trust is subject to the jurisdiction of the Surrogate's Court — most commonly a testamentary trust created under a will admitted to probate, or a lifetime trust that has been the subject of a prior accounting or other proceeding — a copy of the decanting instrument must also be filed with the court that has jurisdiction.
6. Wait 30 days. The decanting is effective 30 days after service of the notice, unless every person entitled to notice delivers a written waiver of the 30-day period. Note that the beneficiaries' consent is not required — only notice — and a beneficiary's silence during the 30 days does not amount to consent or a release of claims. A beneficiary who believes the decanting violated the statute or the trustee's fiduciary duties may still challenge it afterward, typically by petition or objection in the Surrogate's Court.
7. Fund the appointed trust. After the effective date, retitle the assets: new EIN if appropriate, new brokerage and bank account registrations, deeds for real property, and assignments for business interests. A decanting that is signed but never funded accomplishes nothing.

Although no proceeding is required, EPTL 10-6.6 permits the trustee to seek advance approval from the Surrogate's Court. Trustees commonly do so where the decanting is aggressive (eliminating a class of remainder beneficiaries under the unlimited-discretion track), where litigation among beneficiaries is already pending, or where the trustee wants the protection of a decree before making a major change. The statute also makes clear that a trustee has no affirmative duty to decant, so beneficiaries generally cannot surcharge a trustee for declining to exercise the power.

Timing Summary

Common Pitfalls

• Misclassifying the discretion. Treating a HEMS power as "unlimited discretion" and changing beneficial interests under the (b) track is the single most dangerous error. The resulting appointed trust may be void as to the improper changes, and the trustee faces surcharge exposure.
• Trustee-beneficiary exercises the power. A trustee who is also a beneficiary eligible for distributions is not an "authorized trustee" and cannot decant. Appoint an independent co-trustee first.
• Skipping the acknowledgment. A signed but unnotarized decanting instrument fails the statute's execution requirement.
• Incomplete notice. Every person interested in both trusts must receive the instrument and both trust documents. Missing a contingent remainder beneficiary leaves the decanting open to attack.
• Cutting off vested rights. Attempting to eliminate a mandatory income interest, a withdrawal right, or an annuity/unitrust interest violates 10-6.6(n)(1) no matter how broad the trustee's discretion.
• Tax damage. Decanting a GST-grandfathered trust, a marital trust, or a 2503(c) trust without tax analysis can convert a routine administrative fix into a six- or seven-figure tax problem.
• Ignoring pending litigation. Decanting mid-dispute to disadvantage an objecting beneficiary invites a bad-faith challenge; in that posture, seeking court approval first is usually the wiser course.

How Decanting Relates to Other Trust Statutes

Decanting under EPTL 10-6.6 assumes the trustee already holds a power to invade principal under the trust instrument. Where the instrument gives the trustee no invasion power, a beneficiary in need may instead petition the court under EPTL 7-1.6, which allows court-ordered invasion of trust principal in limited circumstances — a separate remedy with its own standards. Decanting also should not be confused with an ordinary termination distribution: the rules governing distribution of irrevocable trust assets to beneficiaries and the question of when trust assets can be distributed concern the trustee paying assets out of the trust, whereas decanting keeps assets in trust under improved terms. Finally, decanting differs from amendment by consent under EPTL 7-1.9, which requires the creator to be alive and every beneficiary to consent; decanting requires neither.

Albert Goodwin is a New York attorney who represents trustees and beneficiaries in trust decanting matters — structuring and executing decantings under EPTL 10-6.6, obtaining Surrogate's Court approval where warranted, and challenging or defending decantings in litigation. More information is available on our New York trust decanting attorney page, or you can contact the office to discuss your situation.